It would depend on what purpose you are going to be using them for and how good it works with clustering.
Instead of having number of smaller servers its better to have few larger servers. What type of website do you plan to host there?
Well larger servers it's easier to maintain but at the same time when one of these machines fail you're losing a bigger chunk of your capacity. I'm of course assuming you're doing some sort of web server load balancing.
No, IMHO. a) Lower initial cost, buy as you need. b) More scalable (i.e. its much easier to buy cheap things than expensive things). c) Two individual servers that cost $X will (probably) be more powerful than one server that costs the same. In fact, maybe even 3 low cost servers would be more powerful than the same-costing bigger one. d) Lowers the cost of failure, both in monetary and capacity terms. The biggest Internet companies scale horizontally for a reason - Google, Yahoo, Amazon, etc all do it this way.